Deciding whether to refinance can be a complicated decision for borrowers, and a lot rides on getting it right. The good news is that many financial calculators designed to help in the decision process are freely available on the Web. The bad news is that most borrowers have great difficulty finding a calculator that will help them, partly because they aren’t sure what their question is, and partly because many of the calculators are badly designed.

To do it right requires three steps. Step 1 is to clarify the question you want answered. Step 2 is to understand how the question ought to be answered. Step 3, discussed next week, is to find the online calculator that will answer your question properly.

Formulating the question

Calculators are designed to answer a specific question, and it is important for the borrower to get the question right before looking for the calculator that will answer it. If your question is whether refinancing will reduce your mortgage payment, for example, you don’t need a refinance calculator — a simple mortgage payment calculator will do.